Stano writes ...

What exactly does this soft proof mode do (in terms
of what profile gets applied when)?

When you print a file the RGB values get translated by the software
into different numbers for the printer, ideally so that what spits out
on the print ('hard proof') looks as close as possible to what you see
on the screen. This translation is a basic concept behind the ICC
color managment flow, explained well here
....http://www.creativepro.com/story/feature/13605.html

What 'soft proofing' does is try to emulate what the final print will
look like by changing the brightness and colors on the screen to mimic
how the final print will appear. So you have a 'soft proof' on the
monitor and after you apply the printer profile you can make edits for
contrast and color for that particular paper/ink profile, if necessary
(usually best to put these in a separate layer set).

If you have a good monitor, accurate monitor profile and accurate
printer profiles then you can usually get 90-98% accuracy, but there
are a lot of bad profiles floating around so for many people it doesn't
work accurately. Here's an article explaining it in more detail ...
http://www.creativepro.com/story/fea...l?origin=story

This feature was added in Photoshop 6 and Elements typically lags
Photoshop in features by 2-3 versions, so maybe Adobe has included it
with V 4 or perhaps in V 5 (it's not in Elements 3).

Bill